Lord Whitty: My Lords, the noble Lord seeks clarification, but his amendments would instil a degree of confusion. Clearly, we want licensees' development activities to be subject to general environmental duties. However, they will already be subject to the same environmental controls as any other developer of land. Where undertakers exercise powers on licensees' behalf, they will be carrying out a function placed on them by the Bill and subject to the environmental requirements that apply when they carry out their other functions. Therefore, the amendment is unnecessary.

Amendments Nos. 109 to 113 would require licensees to have regard to the desirability of protecting the environment, and so forth, when they formulate or consider proposals relating to undertakers' functionsbut not, for some reason, their own. That would introduce a note of serious confusion, and the proposal is anyway unnecessary because that issue is covered under the general duties.

Amendments Nos. 133 and 134 seek to introduce a condition before undertakers take steps to facilitate supplies by licensees not to damage or disturb green belt land or property designated under a conservation notice. However, control of development within the green belt is concerned only with the openness of the green belt, and Section 3 of the WIA already requires undertakers to have regard to protecting buildings and sites of special interest. The amendments would introduce a completely new restriction for licensed water suppliers that would not apply to any other company or person.

The area is confusing. However, in short, when undertakers carry out functions, including exercising works powers in response to a request from a licensee, the general environmental duty under Section 3 will apply. If licensees carry out activities themselves, they will be subject to normal development controls and would need planning permission, together with any specific consents with respect to protected land or buildings, as well as needing to reach agreement with the landowners in the first place.

24 Jun 2003 : Column 206

I share the objective behind the amendments, which is to protect the environment without obstructing the path of licensees to the supply system. However, the amendments would confuse the situation, as almost all their intention is covered by other parts of the Bill or by general planning law.

Lord Dixon-Smith: My Lords, I am grateful to the Minister for his reply. I am not particularly surprised by it as I have had enough experience of general planning law to know what is involved. As regards the first four amendments in the group in particular, it is good to have the assurance that they are unnecessary and that the noble Baroness, Lady Farrington, was right in her presumption, even though at that stage it was a presumption and she could not define it as a fact. Although we shall need to study the Minister's reply with care I am grateful for it. It seems to me that it is a satisfactory explanation. Certainly it is satisfactory for now. With that I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 110 to 113 not moved.]

The Deputy Speaker (Viscount Simon): My Lords, in calling Amendment No. 114, I advise your Lordships that if it is agreed to I cannot call Amendment No. 115 due to pre-emption.

Lord Whitty moved Amendment No. 114:

Page 132, leave out lines 3 to 5.

The noble Lord said: My Lords, this rather lengthy series of amendments relates to the competition provisions of the Bill. These are largely technical and consequential amendments. However, there are four amendments to which I should like to draw your Lordships' attention.

I agreed in Grand Committee to take away and consider the restriction on licensees' ability to reintroduce water supplied to a customer into the distribution system. Amendment No. 114 removes new Section 17A(6). The subsection prohibits the reintroduction of water by a licensee to an undertaker's supply system after that water had already been provided to a customer's premises by a licensee. After the discussion in Committee and further consideration, we now consider that the need to meet undertakers' water quality requirements for water input into their systems, in accordance with access agreements, and the likely cost of any necessary retreatment and of making a connection would make such a reintroduction very unlikely in practice; the subsection is therefore unnecessary.

Amendment No. 148 ensures that the powers currently available to undertakers to carry out works to install, repair or replace meters continue to be available to them when a licensee rather than an undertaker uses a meter. Amendment No. 149 extends to meters used by licensees the offence of tampering with a meter so as to prevent it from showing an accurate reading. Amendment No. 151 provides for the exchange of information about pollution incidents between the Environment Agency and licensees in order to protect the public water supply system and the environment.

24 Jun 2003 : Column 207

The remaining amendments are technical. Unless noble Lords have particular concerns I shall not expound on those in detail. I beg to move.

On Question, amendment agreed to.

Lord Corbett of Castle Vale moved Amendment No. 116:

Page 133, line 45, leave out "50" and insert "25"

The noble Lord said: My Lords, I was encouraged to raise the issue of the threshold requirement by WaterVoice, the body representing water customers, and Aqua Resources Ltd, which feels that, given the privatisation of the water industry, every consumer should have a choice of supplier.

At least one of the industry regulatorsI do not know which although the Minister doesbelieves that the threshold figure should be different from the 50 megalitres in the Bill; that is, either higher or lower. The Government argueas the Minister did in a letter to me dated 22nd May 2003that,

"the threshold is a vital element in ensuring effective implementation of the competition regime".

That is not the whole story because the effect of the present threshold is to limit competition and in turn distort the market because it shields a clutch of monopoly water suppliers from full competition. While they enjoy that protection they can use that monopoly position to offer, for example, gas and electricity services in markets more liberalised than the protected water market.

There are other companies such as Countryside Energy, part of Countrywide Farmers plc, which offers a range of services including the supply of mains gas and electricity but is unable to do the same with water although it believes that extra competition would benefit its customers.

The 50 megalitre threshold would provide choice to just 2,000 non-domestic customers compared with the 30,000 in the first phase of competition in the energy sector. Perhaps the Minister will be good enough to explain why that is so.

If the threshold was set at 20 megalitres, about 5,500 customers would be eligible, rising to about 12,000 if set at 10 megalitres. Customers with water consumption of 20 megalitres pay bills of about £10,000 a year and those who use 10 megalitres about £5,000. As WaterVoice comments:

"We believe bills of this amount are large enough to make the prospects of a better deal in terms of price and service in a competitive market attractive to these customers".

It worries that new entrants will not be attracted and wants a 10 millilitre threshold.

I understand the need for extra caution with water because of public health concerns but that does not dictate a particular threshold number. There is also the need to do nothing to impair the viability of service

24 Jun 2003 : Column 208

providers as competition is rolled out. So there are costs and benefits and, as the Minister has said, a balance to be struckagain I quote from his letter of 22nd May

"which allows the increase of competitive activity in a controlled manner to ensure that the regulatory regime is robust, and the effects of competition are consistent with a sustainable water industry".

I anticipate that the Minister will not feel able to accept the amendment although perhaps when he replies he will make clear when the threshold level will be reviewed, and by whom, and whether he can say that it need not last for ever. I beg to move.

Baroness Miller of Chilthorne Domer: My Lords, I have an amendment grouped with the one we are discussing to which I should like to speak. I want to hear the Minister say a little more about the threshold limits. They are set at a level which results in competition not being a reality for most consumers. There is a vast amount of water regulation relating to competition when that is not a reality.

What happens when a 50 megalitre user becomes more efficient in his use of water and becomes a 10 megalitre user? Does the Bill provide for that? We have talked a lot about efficiency and we have heard some good examples of companies that have saved vast amounts of water but does that mean that they can no longer enjoy the possibility of choosing between suppliers? At the moment we are dubious that the current proposals will stimulate any energy savings or produce innovations. The proposals certainly allow new entrants to cherry pick the larger use customers that they will supply.

Under the proposals in the Bill there is a perverse incentive for new entrants to select customers that are cheap to supply so, far from benefiting all customers, that may well have a negative effect on existing suppliers' finances and increase customers' bills. I should like to hear the Minister's comments on those issues. I have become more concerned about the matter as the Bill has progressed through its stages.